Over Tk 1100 cr spent before starting project

Second unit of Eastern Refinery

Staff Correspondent: Bangladesh Petroleum Corporation (BPC) has yet to start construction of the second unit of Eastern Refinery Limited (ERL) 14 years ago to increase the capacity of fuel oil refining. However, at least Tk 1100 crores have been spent in various sectors including land acquisition, consultant appointment, proposal formulation.
Several related sources said that although the project was supposed to be implemented by 2016, the reasons for not being implemented were lack of funds and slowness in official work and lack of sincerity of officials.
As the project was not implemented on time, the Single Point Mooring (SPM) project, which was built to transfer fuel oil imported from the sea to the pipeline at a low cost and in a short time, is also not being used to its full capacity.
Sources in the Department of Energy and Mineral Resources said that due to lack of investors for a long time, a decision was taken to implement the project with its own financing, but it has been stuck. Because private sector major industrial group S Alam Group jointly with ERL wants to own 80 percent of the project with an investment of about $4 billion (about Tk 44 thousand crore) for the construction of the second unit.
State Minister for Power, Energy and Mineral Resources Nasrul Hamid said, ‘S Alam Group has made a proposal. It is still in its early stages. A decision will be taken after analyzing the proposal of the Energy Department.
According to sources, the Department of Energy and Mineral Resources has agreed to the proposal. BPC has constituted a committee under the direction of Energy Department to scrutinize the proposal. However, BPC and ERL still want to do the project with their own money.
Mining fuel oil has to be refined to make it usable. Refining produces various by-products including bitumen, LPG, which are used in various applications.
The country’s only government fuel oil refinery ERL was built in 1968 at Patenga in Chittagong. The state-owned company has the capacity to refine 1.5 lakh tonnes of crude oil annually. (See Page-7)
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The demand of fuel oil in the country is about 90-95 lakh tons per year. Due to lack of refining capacity, most of the demand for fuel oil is imported in refined form. Refined oil is expensive. As a result, a lot of foreign currency is going abroad. Again, bitumen and other by-products have to be imported.
In 2010, the government took the initiative to set up a second unit with a capacity of 3 million tonnes of fuel oil per year to save foreign exchange besides energy security. At that time, the cost of the project was estimated at Tk 13 thousand crore. A second unit is to be built on 70 acres of the 200 acres of Eastern Refinery at Patenga. Additional land is also acquired for this. Later, the cost of the revised project was estimated at Tk 16 thousand 739 crores. They completed the design of the project (ERL-2) when Technip of France was appointed as the feed contractor. And the Indian company Engineers India Limited (EIL) was appointed as Project Management Consultant (PMC). On April 19, 2016, BPC signed an agreement with the Indian consulting firm. About Tk 1100 crore have been spent for this.
The government has stated at various times that the project is not being implemented due to non-availability of foreign loans. Several companies from West Asia (Middle East) expressed interest in its construction, but ultimately declined due to the small size of the second unit of the Eastern Refinery.
At the time of the latest revision, the project cost was estimated at Tk 23 thousand 58 crore 93 lakh 92 thousand. Of this, Tk 16 thousand 142 crores will be spent by the government and Tk 6 thousand 916 crores by BPC. But this proposal has also been suspended.
In such a situation, on October 13 last year, the Energy and Mineral Resources Department proposed the construction of 500,000 tons of fuel oil refinery on the land of ERL, S Alam Group. On January 29, through a letter signed by S Alam Group Chairman Saiful Alam, the MoU proposal was submitted to the Secretary of the Department of Energy and Mineral Resources. The proposal shows interest in building a new refinery of 3-5 million tonnes capacity. The project proposes 80 percent stake in S Alam Group and 20 percent stake in Eastern Refinery. In a letter to BPC on February 5, the Energy Department informed that the project will be done on the basis of a public-private partnership (PPP) with S Alam Group. According to the instructions of the Energy Department, a committee of seven members was formed by the BPC on February 14.
ERL Managing Director Engineer Lokman said, the project is awaiting approval from the DPP Ministry. BPC formed a seven-member committee to consider S Alam’s proposal. The government will take the final decision after considering the whole.
However, if the project is done in joint investment with S Alam, it is not certain what will happen to the government’s expenditure of about Tk 1100 crore.
Energy expert Prof. Ijaz Hossain said, “Since there has been a delay, now the government can consider S Alam’s investment proposal.” However, in that case, the interests of ERL and the people of the country should be given priority. It is important that the terms of the contract are people friendly. Private companies are more interested in investing in areas where they can make easy profits. The government should see the interests of the country first.
Ijaz Hossain said, “Singapore’s business relationship with S Alam is good. It would be good if they take responsibility for exporting the by-products produced from the second unit abroad. But the whole matter needs to be clarified to the people of the country.
Officials of BPC and ERL say that if BPC itself implements the project with government funding, the purification power will be in the hands of the government. This will ensure energy security of the country. A lot of money has already been spent.
Meanwhile, as ERL does not have a second unit, even though the SPM project designed to supply fuel directly from sea vessels at a low cost and quickly is being implemented, it is not being fully implemented.
In this context, the project director said. Sharif Hasnat said, ‘SPM has the capacity to supply 9 million tons of oil including 4.5 million tons of refined and 4.5 million tons of crude fuel oil annually through two separate pipelines. 4.5 million tonnes of unrefined fuel oil cannot be imported even if the pipeline is fully operational to supply refined fuel oil. Because there is no purification capacity. However, until the implementation of the second unit, efforts will be made to bring up investment in the pipeline project by importing more refined fuel oil.